Washington Department of Revenue Faces Legal Challenge Over Vape Tax Interpretation

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Key Points:

• Legal Challenge Filed: At least two petitions have been filed challenging the Washington Department of Revenue’s (DOR) interpretation of SB 5814, arguing the agency is unlawfully applying the 95 percent “Other Tobacco Products” (OTP) tax to vapor products – an interpretation the petitioner says renders the law unconstitutional.

• Legislative Intent Disputed: SB 5814, passed late in the 2025 session to close a budget gap, expanded the definition of “tobacco products” to include synthetic nicotine – a move clearly aimed at nicotine pouches, not vapor products. The bill did not amend or reference Washington’s separate vapor tax statute (RCW 82.25).

• Existing Vape Tax Framework: Vapor products are already taxed under RCW 82.25, with e-liquids taxed per milliliter. Applying the OTP tax on top of this would override a distinct statutory scheme the Legislature left intact.

• Agency Overreach Alleged: After passage, the DOR revised fiscal notes to assert – without legislative action – that vapor products containing synthetic nicotine fall under the OTP tax. The petition argues this is an unauthorized expansion of the law by an executive agency.

• Two Legal Theories:

  • SB 5814 does not apply to vapor products at all; therefore, the court should enjoin enforcement of the OTP tax on vapes.

  • If applied to vapor products, SB 5814 is unconstitutional under Washington’s single-subject rule and the requirement to set forth amended statutory text, since it neither disclosed nor amended the vapor tax statute.

• Public Health Context: Vapor use in Washington has risen alongside continued declines in smoking. In 2023, 443,866 adults (7.2 percent) used e-cigarettes – up 35.8 percent since 2016 – with higher use among lower-income and less-educated adults.

• Equity Concerns: A 95 percent retail tax would disproportionately burden populations most likely to vape, potentially pushing consumers back to smoking or into illicit markets.

• Economic Impact: The independent vapor industry generated over $264 million in economic output in Washington in 2023. A 95 percent tax could devastate small businesses, threaten hundreds of jobs, and ripple through supply chains.

• Evidence on Taxes: Research shows vape taxes reduce vaping more than cigarette taxes reduce smoking, undermining harm reduction by discouraging substitution away from combustible products.

• What’s Next: The petitions seek emergency relief, with a stay hearing expected soon. The cases could rein in agency overreach and protect access to lower-risk alternatives for hundreds of thousands of Washingtonians.

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251218 D'Sylva Petition FINAL TO FILE.pdf

Download PDF • 1.96MB

2025.12.11 Complaint.pdf

Download PDF • 4.29MB

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Various petitions have been filed in the Evergreen State challenging the Washington Department of Revenue’s (DOR) interpretation of Senate Bill 5814 (SB 5814), enacted during the 2025 legislative session. The petitioners argues that the DOR is wrongly applying the state’s “Other Tobacco Products” (OTP) tax to vapor products – an interpretation that, if allowed to stand, renders the law unconstitutional.

SB 5814 was rushed through the Legislature in the final days of the 2025 session as lawmakers sought to address Washington’s multi-billion-dollar budget gap. The bill increased or created excise taxes across multiple industries. A key provision expanded the statutory definition of “tobacco products” to include synthetic nicotine, a change clearly intended to bring nicotine pouches into the state’s tobacco tax framework at a 95 percent tax on the retail price.

Vapor products, however, are regulated under a separate statutory framework and are already subject to their own excise tax structure. Under RCW 82.25, containers of e-liquid greater than 5 milliliters are taxed at $0.09 per milliliter, while all other vapor products are taxed at $0.27 per milliliter. Notably, SB 5814 never amended, referenced, or repealed the vapor product statute (RCW 82.25).

Following passage of SB 5814, the Department of Revenue issued required post-session fiscal notes. In later revisions, the agency asserted – without legislative action – that vapor products fall within the amended definition of “tobacco products” because some contain synthetic nicotine and therefore should be subject to the 95 percent OTP tax. The petitions argue this interpretation is unlawful because it was never contemplated by the Legislature, directly conflicts with existing statutory definitions, and represents an unauthorized expansion of the law by an executive agency.

The petitioners advance two alternative legal theories.

First, they argue that SB 5814 does not apply to vapor products at all. Washington law explicitly defines and taxes vapor products separately under RCW 82.25.010 and RCW 82.25.050, and SB 5814 left those provisions untouched. By attempting to apply the OTP tax to vapor products, the DOR is effectively rewriting existing law, disregarding clear statutory boundaries, and exceeding its authority. Under this theory, the court should enjoin the DOR from collecting or enforcing the OTP tax on vapor products.

Second, the petitioners argue that if SB 5814 is interpreted to apply to vapor products, then the law is unconstitutional under two provisions of the Washington Constitution. Article II, Section 19 requires that legislation contain only one subject, clearly expressed in its title. Neither SB 5814’s title nor its legislative history discloses an increase in vapor product taxes; applying the bill to vapor products would therefore violate the single-subject rule. The petitioners further argue that SB 5814 violates Article II, Section 37, which requires the Legislature to set forth the full text of any statute it amends. SB 5814 did not set forth or amend RCW 82.25, yet the DOR’s interpretation effectively alters that statute – an amendment by implication that the Constitution forbids.

These petitions underscore the broader challenges surrounding the regulation and taxation of tobacco harm reduction products. Since their introduction to the U.S. market in the mid-2000s, e-cigarettes have faced litigation, shifting regulatory regimes, punitive taxation, and outright prohibition – despite mounting evidence of their role in reducing smoking.

In Washington, as in the rest of the country, vapor use has increased alongside sustained declines in cigarette smoking. According to the Centers for Disease Control and Prevention, an estimated 443,866 Washington adults (7.2 percent) were using e-cigarettes in 2023, representing a 35.8 percent increase since 2016. As with smoking, vaping is more prevalent among lower-income and lower-educated adults. In 2023, 16.2 percent of Washington adults earning $25,000 or less reported vaping, compared to 8 percent of those earning $50,000 or more. Among adults without a high school diploma, 14.1 percent vaped, compared to 4.3 percent of college graduates. A 95 percent retail tax on vapor products would disproportionately burden these populations – many of whom rely on lower-risk alternatives to remain smoke-free – and many who are already struggling.

Research increasingly shows that excessive taxation of harm-reduction products produces unintended consequences. A recent study comparing cigarette and e-cigarette taxes have found that vape taxes reduce vaping more sharply than cigarette taxes reduce smoking, undermining public health goals by discouraging substitution away from combustible products.

The petitions seek emergency relief, with an emergency stay hearing expected by the end of the month – a critical step given the potential economic fallout. Industry analysts estimate that in 2023, the independent vapor industry generated more than $264 million in economic output in Washington. A 95 percent retail tax would devastate manufacturers, wholesalers, vape shops, and convenience stores, threatening hundreds of direct jobs and thousands more indirectly.

At best, the Department of Revenue’s interpretation of SB 5814 represents regulatory overreach. At worst, it is flatly unconstitutional. The courts now have an opportunity to rein in agency excess and protect access to less harmful alternatives for the hundreds of thousands of Washingtonians who depend on vapor products to stay smoke-free.

Nothing in this analysis is intended to influence the passage of legislation, and it does not necessarily represent the views of Tobacco Harm Reduction 101.